Quarterly Chairs’ Meeting
Fraud Awareness and the
Whistleblower Policy
Mike Jenson
Director
Audit & Advisory Services
February 4, 2004
Present Situation
Recovering economy
Global
National
State-wide
Budget cuts
Staff lay-offs
No staff merits
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Do More with Less…
Inadequate segregation of duties
Lack of supervision, monitoring and
reconciliation procedures
Short cuts – production oriented
Policy and Law Non-compliance
Rationalize fraudulent activities
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Fraud is Costly
Direct monetary costs/losses to the dept.
Devastating (senior trusted employee)
Question management skills
Time and resources involved in investigation procedures
Disciplinary action decisions
Damaged careers and reputations
Negative impact on staff morale
Possible external agency audits
Negative impact on future funding or donations
Negative media exposure
Headlines…..Headaches
San Francisco Chronicle (August 1995)
Embezzlement probe of UC Claims Manager – at least $500k gone
Wall Street Journal (December 1996)
Audit finds financial irregularities at UC Berkeley Business School
Los Angeles Times (February 1997)
Doctor who studied at UCI says her eggs were misused
San Francisco Chronicle (July 1999)
Fired UC Cashier Arrested in $4.7 million theft suspect financed
daughter's angel firm, police say
Los Alamos National Laboratory (2003)
Procurement card issues
The Press-Enterprise (December 1998)
Ex-UCR employee arrested – Nearly $20,000 was allegedly embezzled
The Press-Enterprise (February 2001)
Former UCR employee sentenced to prison- Starting in 1996, she
embezzled $188,563 via checks to persons not on the University payroll 5
Common Types of Fraud
Procurement card
Fictitious travel vouchers & purchase orders
Unrecorded vacation and sick leave
University resources used for personal gain
Entertainment w/o legitimate business purpose
Claimed benefits for non-dependents
Missing cash w/o forced entry
Unrecorded cash collections
Payroll issues
Duties of Department Chairs
APM-245-4:
A department chair is a faculty member who serves as the academic
leader and administrative head of a department of instruction or
research, or a clinical service.
APM-245 Appendix A:
As leader of the department, the chair has the following duties:
3. The appointee should be receptive to questions, complaints, and
suggestions from members of the department, both faculty and staff
personnel, and from students, and should take appropriate action on
them.
The chair’s administrative duties include the following:
5. To prepare the budget and administer the financial affairs of the
department, in accord with University procedures.
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Helpful Hints
Be involved with finances
Be aware of “red flags” of fraud
Balance risk and controls
Be ethical and do the right thing
Implement fraud prevention measures
Fraud Prevention Measures
Strong internal controls
Background checks on new employees
Continuing monitoring procedures
Willingness to take action
Employee training
Independent reconciliation procedures
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Fraud Opportunity Checklist
Ask Yourself:
What deviations from acceptable
business practices are possible?
Are there significant variations from
expected financial results?
What are the weakest links in my
department’s internal controls?
UC INVESTIGATION SOURCES FY 2003 Count
Audit
Anonymous 5%
4% Management
55%
Whistleblower
25%
UC Police
4% Outside Party
7%
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Conclusion on Fraud Detection
“ Relatively few fraud and abuse
offenses are discovered through
routine audits. Most fraud is
uncovered as a result of tips and
complaints from other employees.”
Source: Association of Certified Fraud Examiner, 1996
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Whistleblower Policies
Policy on Reporting and Investigating Allegations of
Suspected Improper Governmental Activities
and
Policy for Protection of Whistleblowers From Retaliation
and Guidelines for Reviewing Retaliation Complaints
(Whistleblower Protection Policy)
represent the University’s implementing policies for the
California Whistleblower Protection Act
Effective October 2002
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POLICY OBJECTIVE
To assure an appropriate
INSTITUTIONAL response to any
known or suspected impropriety and
to create an environment that
encourages candor while protecting
the rights of all parties
(i.e. whistleblowers, investigation
participants, subjects and
investigators).
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Policy Objective
UC values ethical and lawful conduct
Policy designed to:
Encourage timely, safe, and open reporting
of alleged wrongs
Ensure consistent and timely institutional
response
Appropriate reporting of whistleblower
investigations
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Improper Governmental Activity
Any activity by a state agency or by an employee that is
undertaken in the performance of the employee’s
official duties, whether or not that action is within the scope
of his or her employment, and that (1) is in violation of any
state or federal law or regulation, including, but not
limited to, corruption, malfeasance, bribery, theft of
government property, fraudulent claims, fraud, coercion,
conversion, malicious prosecution, misuse of government
property, or willful omission to perform duty, or (2) is
economically wasteful, or involves gross misconduct,
incompetency, or inefficiency.
Serious or substantial violations of University policy
may constitute improper governmental activities.
Must directly involve the University either as victim or
perpetrator
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Illegal Order
Any directive to violate or assist in
violating an applicable federal, state, or
local law, rule or regulation or any
order to work or cause others to work
in conditions outside of their line of
duty that would unreasonably threaten
the health or safety of employees or
the public.
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PROTECTED DISCLOSURE
Any good faith communication that
discloses or demonstrates an intention to
disclose information that may evidence:
1) an improper governmental activity; or
2) any condition that may significantly
threaten the health or safety of employees
or the public if the disclosure or intention to
disclose was made for the purpose of
remedying that condition.
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Whistleblower
Person/entity making a protected disclosure
(reporting party)
UC employees (academic personnel or staff),
students, applicants for employment,
vendors, contractors or general public
NOT investigators or fact-finders (do not
determine appropriate corrective or remedial
action that may be warranted)
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Locally Designated Official (LDO)
Appointed by Chancellor
Delegated overall coordination and
implementation of whistleblower procedure
for UCR
Manages all implementing procedures and
ensures UCR effectively responds to
whistleblower reports
Ensures adequate communication and
coordination of allegations of suspected
improper governmental activities
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Section III Conditions
1. Possible violation of any state or federal law or
regulation
2. Significant internal control or policy deficiency
that puts campus at risk of potential losses
3. Likely to receive media or other public attention
4. Misuse of campus resources or creates an
exposure to a significant liability
5. Significant possibility of being the result of a
criminal act
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Section III Conditions (continued)
6. Significant threat to the health or safety of
employees, students or the public
7. Situation that is economically wasteful, or
involves gross misconduct, incompetency,
or inefficiency
8. Likely to involve multiple investigative units
9. Significant or sensitive for other reasons
Significant = $1,000
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Making a Whistleblower Report
REPORTS:
Encouraged to be written
May be oral
Should be factual and detailed
May be direct or anonymous
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Making a Whistleblower Report (continued)
Reports could be reported to:
Campus investigative units
UC Whistleblower Hotline (800-403-4744)
Locally Designated Official (LDO)
Reporting employee’s immediate or other
supervisor
Other appropriate campus administrators
State Auditor or State Auditor Hotline
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Receiving a Whistleblower Report
Be aware of and alert to any communications that may
constitute reports of allegations of suspected improper
governmental activity
Ask questions; obtain specific and relevant information from the
WB during initial contact
Encourage the whistleblower to make a written report
Immediately create written document of all oral reports
Unless a section III condition, exercise appropriate professional
judgment in determining which matters can be reviewed under
own authority
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Receiving a Whistleblower Report
(continued)
Consult with supervisors, LDO, campus investigative
units and exercise of judgment should err on side of
upward reporting
Turn matter over to LDO or investigative unit if
investigative procedures go beyond normal
responsibilities
If your whistleblower wants to be anonymous, advise
him/her that confidentiality will be maintained to the
extent possible, but within
limitations of law and policy
Need to conduct a competent investigation
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Whistleblower suspects improper governmental activity
Whistleblower reports to
UC Hotline Whistleblower reports to report recipient Whistleblower reports to
800-403-4744 (LDO/Supervisor/Other campus administrators/Campus investigative units) Bureau of State Audits
Hotline 800-952-5665
Is the alleged matter an
Report to LDO improper governmental activity
Bureau of State Audits
and is there sufficient information? No
addresses matter
Is the alleged matter an Whistleblower informed
Yes
improper governmental activity and of no investigation
No is there sufficient information? Is a Section III
Operating unit
condition met?
Whistleblower No management
Directed to operating addresses
informed of Yes Yes unit management
no investigation matter
Is a
Section III Involves Chancellor, LDO
No condition met? or LDO’s supervisor?
Involves Yes Report to
No UCOP Sr. VP-
Campus investigative UCOP Sr. VP- Business & Finance
Directed to operating unit head? Business & Finance
Yes addresses matter
unit management
No Report recipient documents report in writing
Yes
Report recipient requests whistleblower to complete UCR Whistleblower Report Form
Involves Chancellor
Operating or LDO’s supervisor?
unit
management
Yes Whistleblower completes UCR No Report recipient completes UCR
addresses Whistleblower Report Form? Whistleblower Report Form
No
matter
Yes
Involves campus Report recipient completes UCR Investigations Report Form
investigative
unit head? No Report recipient forwards UCR Whistleblower Report Form &
Report to UCOP
UCR Investigations Report Form to LDO within one business day of receipt of report
Sr. VP-Business
& Finance
Yes
LDO assigns a master case number
UCOP Sr. VP- LDO
addresses LDO and Investigations Team coordinate with the appropriate campus investigative unit
Business and Finance
addresses matter matter 27
Alleged matter is investigated and whistleblower informed of outcome, as appropriate
Policy for Protection of Whistleblowers from
Retaliation and Guidelines for Reviewing Retaliation
Complaints (Whistleblower Protection Policy)
UC is committed to protecting employees from interference
with or retaliation for having made a protected disclosure or
for having refused an illegal order.
A University employee may not directly or indirectly use or
attempt to use the official authority or influence of his or her
position or office for the purpose of interfering with the right
of a person to make a protected disclosure.
It is the intention of the University to take whatever action
may be needed to prevent and correct behavior that violates
this Policy.
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Contact Information
Audit & Advisory Services (A&AS)
Address: 1201 University Avenue, suite 209 (University Village)
Telephone: 909-787-4667
Fax: 909-787-7209
A&AS homepage: http://audit.ucr.edu/
Suggested links:
About Internal Controls:
http://audit.ucr.edu/internal_controls.htm
Internal Control Quiz/Checklist:
http://audit.ucr.edu/departmental_quiz.htm
UC Whistleblower Policies:
http://www.ucop.edu/ucophome/coordrev/policy/10-04-02.html
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